Browse CFA Level 2

Chapter 2: Currency Market Mechanics

In this section

  • Spot and Forward Currency Quotes and Bid–Offer Spreads
    Explore how spot and forward FX quotes are structured, the roles of base and quote currencies, and how bid–offer spreads reflect transaction costs and market liquidity.
  • Calculating Forward Premiums and Discounts
    Learn how to compute forward premiums and discounts in currency markets, their economic rationale, and how they relate to interest rate parity. Includes formulas, step-by-step examples, practical vignettes, and exam-style questions.
  • Mark-to-Market Value of Forward Contracts
    Explore how currency forwards are revalued over time, the relevant formulas, real-world examples, and key considerations for credit risk management and hedging strategies.
  • Triangular Arbitrage Opportunities
    Explore how to detect and exploit small currency mispricing through triangular arbitrage, from step-by-step identification and calculation to real-world considerations like transaction costs and liquidity constraints.
  • Practical Vignette Applications in Currency Markets
    Discover how to apply spot quotes, forward calculations, mark-to-market valuations, and arbitrage techniques within realistic exam-style vignettes to excel in currency market analysis.
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